Snap Inc Up 52% Since Reporting Blockbuster Q3 Results

Snap Stock Up 165% in 2020, Has Lots of Upside

Snap Inc (NYSE:SNAP) investors have had a lot to cheer about lately. The company that runs “Snapchat” recently reported monster third-quarter results, which led its share price to advance more than 50%.

Trading near its all-time high, Snap stock is up 177% year-over-year, 165% year-to-date, and 478% since bottoming in March. Will the good times continue?

Chances are good that Snap stock will give up short-term ground to profit-taking, which would be well deserved. But the stock’s long-term outlook looks solid and is poised for serious gains in 2021.

Chart courtesy of StockCharts.com

Snap Stock Overview

In its own words, “Snap Inc. is a camera company,” but most people are more familiar with its messaging app “Snapchat,” which makes photos and videos disappear soon after they’re sent. (Source: “Investor Presentation October 2020,” Snap Inc, last accessed November 26, 2020.)

But the company has launched a number of other products and services, two of the most popular being “Spectacles,” which are smartglasses that record video for Snapchat, and “Bitmoji,” a program that allows people to create their own emojis.

Two of its other popular technological services include “Stories,” which allows users to create and share stories, and “Snap Map,” a real-time map that shows the location of nearby friends, their stories, and a heatmap of recent snaps posted. It also allows users to send direct messages to friends.

For some people, that kind of attention might seem a little too much like Big Brother, but many people don’t think so. Every day, 249 million people spend more than 30 minutes using Snapchat. And each day, those users create over four billion snaps.

Who are Snap Inc’s biggest users?

About 75% of people in the U.S. aged 13 to 34 use the company’s services. And they have a lot of disposable income: over $1.0 trillion in direct spending power. That’s great news for digital advertising companies (and for buy-and-hold Snap stock investors).

Knockout Q3 Results

On October 20, Snap announced that its revenue for the third quarter ended September 30 increased 52% year-over-year and 49% sequentially to $679.0 million. Wall Street was looking for the company’s revenue to come in at $555.9 million. (Source: “Snap Inc. Announces Third Quarter 2020 Financial Results,” Snap Inc, October 20, 2020.)

The company reported a third-quarter net loss of $200.0 million, (loss of $0.14 per share), compared to a net loss of $227.0 million (loss of $0.16 per share) in the same period last year.

Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) were $56.3 million ($0.01 per share), versus an adjusted EBITDA loss of $42.3 million (loss of $0.04 per share).

“Our focus on delivering value for our community and advertising partners is yielding positive results during this challenging time. We’re excited about the growth of our business in Q3 as we continue to make long-term investments in our future,” said Evan Spiegel, CEO.

“The adoption of augmented reality is happening faster than we had previously anticipated, and we are working together as a team to execute on the many opportunities in front of us.”

Highlights of Snap Inc’s third quarter:

• Snap Inc’s daily active users grew by 18% year-over-year to 249 million.
• The average revenue spend per user on Snapchat increased 28%.
• The company launched a new unscripted series, The Solution Committee, featuring Jaden Smith
• Snap launched another new unscripted series, Coach Kev, featuring Kevin Hart
• The company launched the second season of its docuseries franchise VS The World, featuring Conor McGregor
• Snap entered new partnerships with Champs Sports, Clearly, Essie, Hoka One One, Kohl’s Corporation (NYSE:KSS), Levi Strauss & Co., Sally Hansen, and Jordan Brand, which is part of Nike Inc (NYSE:NKE).

Analyst Take

Snap stock has been on a tear since March, rising 478% and currently trading in record territory.

The company reported strong third-quarter results, and management expects the momentum to continue in the fourth quarter, with revenue growing by 47% to 50%. After Snap Inc reported years of losses, Wall Street expects the company to be profitable in fiscal 2021, with annual earnings per share of $0.49.